QUESTION THREE $[20]$

$3\mathrm{.}1$ Cool Kids annual sales amount to $300000$ units. Orders are placed in multiples of

$100$ units. The purchasing price is R$1$ per unit. The carrying cost of inventory equals

$25\%$ of the purchase price of goods. The ordering cost is R$20$ per order. Three days

are required for delivery. The desired safety stock for the firm is $10000$ units. This

amount is on hand.

Required:

$3\mathrm{.}1\mathrm{.}1$ Calculate the EOQ for Cool Kids. $(4)$

$3\mathrm{.}1\mathrm{.}2$ Determine the number of orders to be placed each year $($assume a $360$ day year$).(3)$

$3\mathrm{.}1\mathrm{.}3$ Determine the re$-$order point for inventory. $(3)$

$3\mathrm{.}2$ The following data was extracted from the company statements of Up Jean Ltd$,$ a

clothing retail outlet for the year ended $31$ March $2014$:

Credit purchases R$330000$

Credit sales R$590000$

Opening stock R$87500$

Closing stock R$75000$

Debtors R$98500$

Creditors R$41000$

$5$

Required:

$3\mathrm{.}2\mathrm{.}1$ Calculate the length of the working capital cycle by making use of the ratios, days

stock on hand $($inventory$)$; debtors collection period $($receivables$)$ and creditors $($payables$)$

settlement period. $(10)$